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CPI Aero will spend $9 million to acquire a unit of Air Industries

Lou Lentino, a structural engineer, works on a

Lou Lentino, a structural engineer, works on a portion of a wing of a Gulfstream G650 aircraft at CPI Aero in Edgewood, March 25, 2014. Credit: Heather Walsh

CPI Aerostructures Inc. has agreed to buy the specialty welding unit of another Long Island aerospace contractor in a deal cut at breakfast at a local diner.

Edgewood-based CPI Aero said Thursday it would acquire Welding Metallugy Inc., a subsidiary of Hauppauge-based Air Industries Group Inc. for $9 million

WMI, also based in Hauppauge, provides specialty welded products and assemblies to aerospace customers such as Sikorsky, Lockheed Martin, Northrop Grumman, Kaman Aerospace and Raytheon.

Douglas McCrosson, president and chief executive officer of CPI Aero, said in an interview that WMI has about 70 employees and that the company would be "largely intact" when it moves from leased space to CPI's 171,000-square-foot facility.

"We've already started to make space available to accommodate the extra people and machines," he said.

CPI's head count, now about 250, is expected to reach 310 or 320.

McCrosson said that the acquisition is CPI's first in more than 20 years and fulfills the company's publicly stated desire to augment its internal growth.

"We've been working hard to find the perfect opportunity," he said, and when Air Industries broached the deal around Thanksgiving, "we were very receptive."

A breakfast meeting at the Peter Pan Diner in Hauppauge helped clinch the deal.

CPI Aero said the acquisition will deepen its engagement on defense projects that both companies already work on, including the Northrop Grumman E-2D and the Lockheed Martin F-35, while opening opportunities on WMI programs such as Raytheon’s Seasparrow missile launching system.

The deal, which is expected to close in this year’s second quarter, also calls for CPI to pay up to an additional $1 million in cash if WMI enters into specified contracts in 2018. McCrosson said CPI Aero would finance the deal by expanding its current credit facility.

WMI is expected to contribute more than $15 million in annual revenue.

Air Industries has faced financial struggles in recent years, posting a net loss of $6.9 million for the nine months ended Sept. 30. Luciano "Lou" Melluzzo, who became Air Industries' chief executive in November, said the sale gives the company liquidity and allows it to concentrate on its core business of machining metal. The company makes jet engine turbine cases and rings and landing gear for the F-15, F-18 and other aircraft.

The deal "allows our management team to focus on exploiting our most exciting business opportunities where we already have a large backlog," Melluzzo said.

Canaccord Genuity Group, based in Toronto, was the financial adviser for CPI Aero and Manhattan-based Graubard Miller provided legal counsel.

The acquisition was announced on the same day as CPI Aero’s fourth quarter earnings release.

For the quarter ended Dec. 31, CPI Aero reported revenue of $23.8 million versus $24.3 million in the year-earlier period. Net income was $2.1 million, or 23 cents per diluted share, compared with $2.1 million, or 24 cents per diluted share, in the 2016 quarter.

Shares of Air Industries rose 0.6 percent Thursday to close at $1.60, while shares of CPI Aero climbed 4.9 percent to $8.65.

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